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Supreme Court rules that the calculation of a "day's pay" for employees on annual contracts is one calendar day's pay

The Supreme Court has held that an employer could only withhold one calendar day's pay (rather than one working day's pay) when its employees went on a one-day strike.

The employees were teachers employed on annual contracts and regularly worked outside their normal contracted hours. In the absence of any express wording in their contracts stating otherwise, the appropriate deduction for the employer to make for a day's pay was 1/365th of their annual salary (Hartley & Ors v King Edward VI College, 2017 UKSC 39).

Background

When employees engage in strike action, employers are not obliged to pay them for any time spent not working. Accordingly, employers will usually make an appropriate deduction from their wages.

Where employees are employed on contracts which specify normal working hours and their pay is calculated by the hour, then the deduction will be determined by reference to the hours lost.

Where there are periodic payments which are not entirely divisible, such as annual salaries, the Apportionment Act 1870 (the Act) provides that these are to be apportioned at a daily rate of 1/365th of annual pay (section 2) unless the contract expressly states otherwise (section 7).

However, in Cooper and others v The Isle of Wight College [2007] EWHC 2831, the High Court held that when a contract contains a definition of the working week and sets out entitlement to holiday, then it should be apportioned over the working days in the year, regardless of when it is paid (on the basis that this would amount to a disapplication of the Act under section 7). As a result, the Court accepted that the daily rate for a full-time worker was 1/260th of annual salary (5 days x 52 weeks = 260) rather than 1/365th.

In Amey v Peter Symonds College [2013] EWHC 2788, the High Court held that the reference in section 2 of the Act to "accruing from day to day" must be to each calendar day, but that this section will be overridden by section 7 of the Act if the relationship between work time and pay in the contract is inconsistent with this.

Facts

The Claimants in this case were employed by King Edward VI College (the College) as sixth form teachers. Their employment contracts made reference to "directed time" (when they were required to be at school) and "undirected time" (where they would be undertaking additional tasks in their own time such as marking and preparing lessons).

The Claimants brought claims for unlawful deductions from wages after they suffered a larger salary deduction than they had expected for engaging in a day of strike action in November 2011.

The College had applied a deduction based on a daily rate of 1/260th of the Claimants' annual pay. This was based on the fact that the teachers' working days specified in their contracts were Monday to Friday (5 days multiplied by 52 weeks equalling 260 working days in a year).

The Claimants argued that, under section 2 of the Act, their salary accrued day by day at an equal rate and that the deduction should have been made at the rate of 1/365th of their annual pay.

At first instance, the parties agreed that the Court was bound by the decision in Amey that the correct deduction was 1/260th. The Claimants appealed to the Court of Appeal.

Court of Appeal

The Court of Appeal dismissed the Claimants' appeal.

The Court held that, although section 2 of the Act means that an employee's salary accrues day to day, this does not necessarily have to be at an equal rate over a calendar year. As the Claimants' contracts stipulated that their working days were Monday to Friday only, the College was entitled to calculate the daily rate to withhold salary based on 260 working days per year.

The Claimants appealed to the Supreme Court.

Supreme Court

Allowing the appeal, the Supreme Court found that section 2 of the Act clearly applied to the Claimants' contracts because their annual salaries were entirely indivisible periodic payments and there was no express or implied provision for them to be paid on a pro rata basis. Consequently, the principle of daily equal apportionment specified by section 2 of the Act applied, unless the contract either clearly said otherwise or if there was any other language inconsistent with this.

The Supreme Court was unable to find anything in the Claimants' contracts stipulating for apportionment on anything other than a 1/365th basis. They were paid a salary to perform the duties referred to and there was no suggestion that some of those duties were paid or unpaid. In particular, their duties were not limited to periods when they were carrying out directed work. Given the wide scope of their responsibilities, it was inevitable that they would be carrying out much of their work (i.e. their undirected work) outside of the normal working day on evenings, weekends and days of annual leave.

In the absence of any express wording to the contrary, the Supreme Court held that the College was only entitled to make deductions from the teachers' pay at a daily rate of 1/365th of annual pay.

Comment

The Supreme Court's decision reverses the Court of Appeal's decision and will make it more difficult for employers with employees on annual contracts to calculate a day's pay based on the total number of working days per year, rather than calendar days.

However, the key point to takeaway is that, in each case, the contract of employment must be considered. In this case, the Supreme Court was unable to find any express wording or language in the Claimants' contracts that was inconsistent with apportionment being on anything other than the default rate of 1/365th basis as set out in section 2 of the Act.

Employers who wish to calculate a day's pay as a working day rather than a calendar day should make express provision for this when drafting employment contracts and/or negotiating any relevant collective agreements. This may be particularly prudent for unionised workforces where strike action might be more likely, and/or in sectors like health or education where there is more likely to be a dispute about the appropriate rate of pay (e.g. where employees might receive an annual salary despite not being required to perform their duties in the same way throughout the year).

Compare jurisdictions: Employment: USA

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